Natural Killer (NK) cells play an important role in the control of viral infection before the establishment of a specific cytolytic T cell response mediated by CD3-positive MHC-restricted T cells. NK cells are also involved in the rejection of bone marrow transplants. NK cells are dangerous as they kill target cells indiscriminately. Therefore, an efficient mechanism must be in place to prevent lysis of normal cells. This important function is fulfilled by killer cell inhibitory receptors (KIR) specific for MHC class I molecules on target cells. A reconstitution system to test for KIR function in NK cells was developed using recombinant vaccinia viruses. Specific recognition of HLA class I molecules on target cells by KIR resulted in inhibition of the NK cells. Direct and specific binding of KIR to HLA class I molecules was demonstrated using engineered soluble forms of KIR. The inhibition of NK cells by KIR requires zinc and KIR itself binds zinc. However, zinc was not required for KIR binding to HLA class I molecules. The basis for the peptide specific recognition of HLA-B*2705 by NK cells was analyzed. Two side chains of the peptide that is bound to HLA-B*2705 were critical. These two side chains contact residues in the class I heavy chain that are known to control NK recognition. Finally, the first step in the inhibitory signal delivered by KIR was characterized. KIR recruit and activate a tyrosine phosphatase upon tyrosine phosphorylation of the KIR cytoplasmic tail.